Oil shipments from UAE to Asia to be cut next year

• Crude allocation cut – report
• Unclear if output reduced
• Opec puts pressure on

The UAE is reducing its oil shipments early next year as Opec+ pushes for compliance with production cuts in order to try to stop prices falling.

However it is unclear if this means that the country – Opec’s fifth largest producer – is cutting its output, analysts have told AGBI.

Adnoc, the UAE’s state-owned oil company, has reduced the allocation of crude cargo by 230,000 barrels a day (bpd) across a range of oil grades for some customers in Asia, according to Bloomberg.

“It might be refining more, shipping to other places, increasing storage – these cuts don’t necessarily mean a cut in production,” said Justin Alexander, a director at the US consultancy Khalij Economics.

Opec+, which comprises Opec members and their allies led by Russia, has been putting pressure on over-producing countries, such as Iraq, Russia and Kazakhstan, and pushing for quotas compliance.

• Opec+ overproduction persists as oil price sags

• UAE oil exports to India rise, squeezing out GCC neighbours

• Saudi Arabia’s crude oil exports rise to 3-month high

The UAE has also faced scrutiny. Opec data says the country has been complying with the request for cuts, while the International Energy Agency estimates the UAE exceeded quotas by about 300,000 barrels per day all year. 

Mehmet Öğütçü, CEO of the advisory company Global Resources, said that the UAE’s commitment to maintaining output while navigating domestic economic conditions had created tension within Opec+.

Alexander said that the UAE’s quota was low relative to capacity. 

Adnoc can produce 4.85 million bpd, almost 2 million barrels above its Opec+ limit. 

The UAE was promised higher quotas for 2025, but that is largely offset by the delayed taper of voluntary cuts and a slower phase-in of the additional quota over two years.

Robin Mills, CEO of the energy consultancy Qamar Energy, said: “I guess a quid pro quo for that is the better short-term compliance.”

Alexander said: “Even if it is overproducing by 300,000 bpd, it would still be about a third below capacity.”